Tuesday saw a more than five percent decline in oil prices following Israel’s announcement that it has accepted US President Donald Trump’s proposal for a bilateral truce with Iran.
As concerns about a blow to the oil market subsided after a 12-day conflict between Israel and its arch-enemy, Asian stocks were rising. At the open, Frankfurt, Paris, and London also rose.
Brent was down 5.2 percent at $67.75 per barrel at 0650 GMT on Tuesday, while WTI, the primary US crude contract, was down 5.4 percent at $65.01 per barrel.
Lee Hardman of MUFG commented that “market participants have welcomed a potential end to the conflict,” adding that Brent “has now almost fully reversed all of the gains since the conflict started.”
A similar reversal is taking place in the foreign exchange market, where the US dollar is returning recent gains. It is more likely that the US dollar’s downward trend will continue if Middle East risks become less of a market mover.
On Monday morning, crude prices briefly surged due to the possibility that Iran would halt oil transportation through the vital Strait of Hormuz in retaliation for a US attack on its nuclear facilities over the weekend.
However, they fell as much as 7% when Iran claimed to have fired missiles at a significant US base in Qatar, leaving oilfield assets undisturbed.
The “war premium” Tehran maintained composure. Their “retaliation” struck a US base in Qatar; it was loud enough to make headlines but not so loud as to rock the foundations of the oil market, according to Stephen Innes of SPI Asset Management.
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“And the war premium crashed out of crude as soon as that became evident.”
Israel has “achieved all the objectives” in its conflict with Iran, the government declared in a statement on Tuesday, adding that it has eliminated “an immediate dual existential threat: nuclear and ballistic.”
The statement declared that “Israel will respond forcefully to any violation of the ceasefire.”
Shanghai closed the day 1.2 percent higher, while Tokyo finished the day 1.1 percent higher. In the afternoon of Tuesday, Hong Kong was up 2.1 percent.
Taipei gained 2.1 percent, Jakarta put on 1.3 percent, Seoul jumped 3.0 percent, and Sydney ended the day up 1.0 percent.
Virgin Australia had a spectacular recovery from almost going bankrupt more than four years ago, and the airline saw a substantial increase in value as it returned to the local share market.
London’s early trading gains were limited as shares of oil majors Shell and BP dipped due to the decline in oil prices, but Paris was up 1.5 percent and Frankfurt surged 1.8 percent.
Michelle Bowman, the governor of the Federal Reserve, stated that she would favor lowering interest rates at the July meeting if inflation remained stable, which caused the dollar to lose gains in the foreign exchange markets.
The Fed is now expected by the market to start lowering interest rates again in September.
According to Wan, Bowman stated that “continuing progress in tariff negotiations providing a less risky economic environment to adjust policy” was the reason behind the dollar’s decline.
The Tokyo-Nikkei 225 key data at approximately 0700 GMT: UP 1.1 percent at 38,790.56 (close)
Hang Seng Index for Hong Kong: up 2.1% at 24,181.94
Composite for Shanghai: up 1.2% at 3,420.57 (close)
Euro/dollar: up from $1.1581 on Monday to $1.1609.
Dollar/pound: up from $1.3526 to $1.3586
The value of the dollar fell from 146.12 to 145.05 yen.
Euro/pound: decreased from 85.60 to 85.44 pennies
West Texas Intermediate: Trading at $65.01 per barrel, down 5.4 percent
Brent North Sea Crude: $67.75 per barrel, down 5.2%
Dow: New York: up 0.9 percent at close of 42,581.78
London’s FTSE 100 is up 0.7% at 8,816.78.
